The quarterly refunding announcement by the US Treasury was in line with expectations, with a lift in the size of 2-3yr bond auctions by $2 bn per month and all maturities beyond by $1 bn per month, equating to an extra $42 bn of new issuance for the coming quarter. Nevertheless, yields have since risen after the announcement, seeing the US 10-year Treasury rate reach as high as 2.745%.
Fed Chair Yellen’s final FOMC meeting this morning isn’t expected to throw up any surprises. There’s a chance that some of the language on growth and inflation is slightly more positive, while keeping alive the prospect of the next hike being in March, which is nearly fully priced.
The local rates market yesterday was caught between two opposing forces, higher US rates and lower Australian rates following the CPI-miss. The net result was a small fall in rates across much of the swap curve and NZ government rates down 2-3 bps across the curve.
Following the FOMC announcement at 8am this morning there are a few minor bits and pieces on the calendar, with the US ISM manufacturing release tonight the most noteworthy.
Daily swap rates
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Jason Wong is on the BNZ Research team. All its research is available here.
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